Are there methods and connections out there on the marketplace that can enable ecommerce sellers to move away from gatekeepers like Alibaba? What is the best way to make those connections? On this episode of The Amazing Seller, you’ll hear from special guest and product sourcing expert Nathan Resnick. In his conversation with Scott, Nathan opens up about his background in the ecommerce industry, how ended up in China, what channels are available to sellers like you, why he created his company, Sourcify, and much more! Don’t miss a minute of this engaging episode featuring Nathan!
How a white guy ended up in China.
Nathan Resnick had no idea that a year-long visit to China while in high school would set him on the path to becoming a product sourcing expert in the ecommerce industry. Pulling the thread of curiosity, Nathan went from an average student in America to full cultural immersion on the streets of Beijing, China. Visiting the markets there and discovering the type of craftsmanship when into the products ignited a spark in Nathan that he fanned into the flame of entrepreneurship. To hear more about Nathan’s story and what he learned from his experiences in China, make sure to check out this fascinating episode, you don't’ want to miss it!
Don’t be afraid to shop around!
If you are at the stage of building your ecommerce business where you are looking for ways to save on your production costs, consider looking for a new supplier! You might not want to rock the boat once you’ve found a solid supplier and that’s understandable, but you need to know that there are some amazing options out there. Why not explore the options and diversify your supply chain? If you’ve heard it once from Scott, you’ve heard it a thousand times – make sure your business isn’t dependent on one channel, product, or supplier for your success! To hear more about shopping your product around to reputable suppliers, make sure to listen to this episode of The Amazing Seller!
The 3 pillars of a valuable supply chain.
Did you know that a valuable supply chain can be broken up into three aspects? It’s true! On this episode of The Amazing Seller, you’ll hear from Nathan Resnick as he shares the three pillars of Sourcify’s successful supply chain. Here are the three pillars of a valuable supply chain;
- Lead time
While it’s extremely difficult to piece together a supply chain that hits all three pillars, it’s not impossible! Find out how Nathan and his team can help sellers like you hone in on a supply process that can take your business to the next level of growth!
Why you should check out Sourcify.
Are you ready to take your ecommerce brand to the next level? What will you do to get your brand in the best position for growth? One of the best resources in the marketplace right now for ecommerce entrepreneurs is Sourcify. Nathan and his team at Sourcify are hard at work to make life easier for sellers like you in a multitude of ways. From clear cut timelines to a streamlined production process, the factories that work with Sourcify are vetted and ready to take whatever you can throw their way! Hear more about the story of Sourcify and why you should check them out by listening to this informative episode of The Amazing Seller!
OUTLINE OF THIS EPISODE OF THE AMAZING SELLER
- [0:03] Scott’s introduction to this episode of the podcast!
- [4:15] Nathan Resnick joins the podcast and shares his ecommerce background.
- [8:15] How did Nathan end up in China?
- [13:00] Nathan talks about sourcing products outside of Alibaba.
- [26:00] The three factors of product production.
- [28:00] Why ecommerce leaders need to think about factory capacity.
- [31:00] Is it worth it to investigate cheaper production options?
- [33:15] What is the Sourcify process of getting a product rolled out?
- [35:00] Who should work with Sourcify?
- [39:00] What you need to know about Chinese tariffs.
- [44:00] Closing thoughts from Scott.
TRANSCRIPT TAS 558
TAS 558: NEW Way To Source Products Not Using ALIBABA (More Products and More Profits)
[00:00:02] Scott: Well, hey, hey, what’s up, everyone? Welcome back to another episode of The Amazing Seller Podcast. This is episode number 558 and today we’re going to be talking about a new way to…
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…source products not using Alibaba. Yes, you heard that right. And how you can find more products not be relying on just China, by the way, and also potentially more profit. Who wouldn’t want all of that? Well, I would and I think you would as well. Well, I’ve invited on a guest who actually has a unique story on kind of how he got into this whole thing. He’s going to open our eyes to this entirely new world of sourcing and give us some tips as well and what we should be looking for when we are out there sourcing and things to kind of look out for. And his name is Nathan Resnick. Great guy. Young guy. I met him actually at Sellers Summit with Steve Chu. Great guy. I had the intro and then him and I we just started just talking and we just had a great conversation just about life in general but then also about this business and then it just turned into talking about sourcing and kind of what he specializes in.
So, I said, “You know what, we got to get you on the show,” and through going back and forth with our schedules and everything, it’s finally going to happen and after I had this conversation with him and we just wrapped up this interview, man, I have to say my wheels are spinning and he gave me a lot to think about and there’s definitely some things that I’m going to be moving forward and possibly even increasing our profits which I think that’s one big one and then not relying on just one factory. Like right now if you’re relying on just one factory, it’s kind of like just relying on one channel. If you’re only relying on Amazon as your channel, well, we all know you better start figuring out that next channel whether that’s an email list, whether that’s maybe it’s your own Shopify store or your website where you’re maybe creating your own funnel, maybe your own sales like whatever it is, eBay, Etsy, whatever it is we all know that you want that.
[00:02:02] Scott: Well, the same thing goes with sourcing your products and finding a supplier but then from there finding not just one but a couple. This way here if anything happens to that manufacturer, I mean, God forbid, something bad happens to their factory or something, they can’t produce your goods anymore, you’re kind of out of business in a sense until you can find a new one. Same idea and he gives us a lot to think about and really excited for you to hear this. Now, before we do jump into this interview which I’m excited for you to hear, I did want to remind you on the show notes, they can be found at TheAmazingSeller.com/558. Again, that is TheAmazingSeller.com/558 and the other thing I do, I just want to throw this in here. I’ve had some people reach out to me and ask me about this whole private client work that we’re doing or our inner circle and a lot of it has to do with what we’re talking about here even today like how to diversify your business and really how to secure your business for the future and I’ve had some people reach out and ask me about that.
If you want more information about working with myself and my team directly, now again this is very limited to only a small group of businesses or people that we work with every single year. It’s what we call our TAS Inner Circle. If you’re interested in seeing even if you qualify at this point in your business to be working with us a little bit more closely where we can kind of help you diversify and really build out your brand and if you want information on that, definitely head over to TASInnerCircle.com. Again, that’s TASInnerCircle.com and you can get all the details there. Again, it’s not for everyone. You have to be at a certain level of business. You have to have some momentum and you have to be willing to go out there and put in the work from what we prescribe during our mastermind meetings and our inner circle meetings and all of that. So, definitely go check that out if you’re interested but it’s really aligned with what we’re talking about today about diversifying and really finding other suppliers but also strengthening our brand and not being relying on just one channel or in this case one supplier.
[00:04:06] Scott: So, I’m going to stop talking now so you can enjoy this conversation, deep conversation about sourcing that I had with my good friend, Nathan Resnick. Enjoy.
[00:04:18] Scott: Well, hey, Nathan. Thank you so much for coming on the podcast. What’s up, man? How you doing?
[00:04:22] Nathan: Scott, what’s going on? Thanks so much for having me.
[00:04:24] Scott: No, no. This is going to be fun, man, and I know we’ve been discussing getting you on and we’ve kind of going back and forth and our mutual friend, Steve Chu, I met you at Sellers Summit and we had a great conversation there. And, yeah, now we finally get to kind of dig in here and talk about this whole sourcing thing which could be a process and a problem for a lot of people but, yeah, I’m excited to have you on, man, and I really just want to dig into sourcing and kind of like the pitfalls but then also what you’ve done to kind of make this a little bit of an easier process. Actually, a better process.
[00:05:01] Nathan: Yeah. Historically.
[00:05:02] Scott: Yeah. So, why don't we just get a little bit of your backstory? Who's Nathan?
[00:05:05] Nathan: Yeah. 100%. I mean, people always ask how’s this white guy end up in China? And you know me, it actually ended up being in high school. I was a foreign exchange student there in high school living with a host family that didn’t speak English attending a local Chinese high school. And this was my junior year of high school so I was literally one of 48 American high school students to fully immerse in China and it was an incredibly eye-opening experience. I mean, I come home for dinner. In some days there’ll be live fish in the sink, have incredible food. It’s really good food there. It’s a lot different to the Chinese food we have here in America and once you know what to order, you’re really going to love it but it was just an incredible experience. So, during that year this was about ten years ago I would go to these markets, the silk market or pearl market in Beijing for people who had been there and at the time they were selling all these knock-off items so my buddies and I in high school we go over there, buy these products, and resell them on Amazon and eBay.
And I’ll tell you, our best-selling product was the Beats by Dr. Dre headphone. These headphones that really the quality was like the same. I mean, these could've been runoff from the same factory where they were overproducing and we buy these headphones for $30, $40 at these markets, resell them on eBay for $200, $300 and in high school, we're making a few thousand bucks a month. I mean, it was pretty fun. And so, then obviously, I soon realize that I was infringing on other people’s IP and have to go out and create my own products which I do recommend every e-commerce entrepreneur do but basically, in college, ended up inventing the first leather watch strap without holes. It worked like a zip tie like a belt buckle and we grew that to a six-figure Shopify store and for me, I was always super excited by the supply chains out of the business. Number one, I speak Mandarin fluently. Number two, I just love to figure out how much these products should actually cost to produce.
[00:07:06] Nathan: And so, as these Shopify stores grew, companies and people begin to ask me, “Nathan, how do you produce products overseas effectively?” And I realize there is this huge gap in the market where right now 90% of companies in the world managed production over email and Excel. And so, about a year-and-a-half ago I started a company called Sourcify. We since become the fastest growing B2B manufacturing platform and we enable companies both small and big and by big, I mean, as big as like Traeger Grills. They do over 300 million in revenue to start using software to manage production. So, you don’t have to send 300 emails to go back and forth through a production run and really it adds transparency and visibility to your supply chain. So, super excited to dive in and really talk about how you can actually bring your own product to life and what flaws you should look out for in a factory.
[00:07:59] Scott: Wow. That’s quite a story, man, and I want to dig in a little bit more to being a foreign exchange student. How did that happen, number one? Like was it something you wanted to do, your parents? How did that happen?
[00:08:12] Nathan: Yeah. I mean, I’ll tell you, I don’t have a tiger mom. I don’t have a Chinese mother, anything like that. Really what it was is I started studying Mandarin my freshman year of high school and I just became really interested in the language and the culture and so my neighbor did this immersion program the year before me and he came back. He took me to lunch at this Chinese restaurant and he’s speaking near fluent Mandarin to the waiter. I’m like, “Man, this is incredible.” Number one, your Mandarin is incredible and, number two, the experience that he had was amazing. I mean, I had an older sister in high school. I knew what I was going to do my junior year of high school back in Maryland where I grew up and really just kind of went all in. It’s kind of funny because at first, my mother was like, “Oh, you should do this,” and then when I got in and she realized that I’d be away from home for a full year she’s like, “Oh no, you shouldn’t go.”
[00:09:05] Scott: Wow. Yeah. That’s crazy, man. I mean, I give you a lot of credit. That’s pretty awesome and like you said, it was just something that you wanted to do. The other thing I want to ask you, say something in Mandarin. I want to hear. Come on. Speak to me.
[00:09:20] Nathan: [Speaking Mandarin] I said we’re just having a conversation now.
[00:09:24] Scott: Wow. So, how long did it take you to be able to do that? Was it more if you being there?
[00:09:30] Nathan: Yeah. 100%. I mean here’s the thing. If you want to go learn any language you got to go to a country that speaks it and to be honest, like for me being there I immerse myself. I live with the host family that literally didn’t speak English. I mean my host mom could say hello and how are you and my host brother was studying English in his middle school so I was helping him a bit with his English but at the end of the day to get around and especially where I was about half an hour or so outside the main city of Beijing there weren't that many foreigners there necessarily and at the time as a foreigner there, 10 years ago, people would be pointing at you like [Speaking Mandarin]. You know, they’d be very interested and curious to see what you are doing there. Now, China has developed to become so globalized which I think is great but you also don’t get as much attention there as I used to as a foreigner.
[00:10:23] Scott: Wow. Okay. So, they were very interested too and probably just your background but your culture and all that stuff too. So, yes, that’s interesting. Now, when you speak Mandarin there now, do you still sound foreign do you think to them?
[00:10:38] Nathan: You know, I think everyone’s language ability fluctuates based on how much they speak it and for me when I go to China about once a month or once every other month to our office in Guangzhou, and it fluctuates. Sometimes, like for example, when I was back there when I graduated high school me and my buddies did like a three-month backpacking trip across China and we’re on this ten-hour train ride and I remember probably the best compliment I’ve got in my life and I’m speaking to this Chinese guy in Mandarin and he goes after our hour-long conversation or so he goes, “Nathan, if I didn't see the color of your skin I would think you were Chinese.” And I was like I mean this is freaking incredible and my writing is definitely not good as my speaking or listening but I think the key to any language is communication and if you can talk and be able to listen then I would consider yourself you’re fluent. I mean, writing especially in Mandarin is quite a challenge.
[00:11:41] Scott: I bet it is. Man, whenever I’ve looked at that, I’m like it’s like drawing pictures.
[00:11:45] Nathan: Yeah.
[00:11:46] Scott: You know what I mean? Like literally like, man, but I guess again whatever you’re accustomed to and if you’re brought up with it, it becomes easier but actually you kind of went the opposite way which that’s even harder so awesome. I congratulate you on that. That is awesome. Cool. So, all right. Let’s talk about this sourcing thing and kind of like why you decided to create the system and even the software and in kind of like take us through the process but then I also want to give people some tips that they can use whether they use your company or not. I want them to get some value here as far as what they should be prepared or what they should ask like anything that you can help us communicate and even like, I mean, the first place a lot of people will go is Alibaba. I mean I’ve done it but we’ve actually found an agent through there and now we kind of speak off of Alibaba to our agent and now that person, actually, the one that we have is actually she left their company but we basically hired her to kind of now work for us privately so now she kind of goes to other – she’s taking train rides for us to other factories kind of like looking over and stuff. So, we kind of lucked out there. It’s not always going to happen that way. So, kind of take me through that I guess the process.
[00:13:02] Nathan: Yeah. 100%. I mean, just like you said, right now I would say the vast majority of people that are looking to produce products that are going on these open marketplaces like Alibaba, like Global Sources, maybe MadeInChina.com and there’s a lot of them out there and I think right off the bat what I want to point out that a lot of Western e-commerce entrepreneurs don’t understand is really how a factory grows and if you’re a factory right now, how do you get new business? You’re either signing up for these online marketplaces like Alibaba where you’re probably spending $50,000 to $100,000 or so to rank for these keywords. Because Alibaba, when you search, let's say watches or hats, the ranking of these factories is all pay-to-play. It’s almost in some sense like ranking a product on Amazon. And so, these factories are spending money to rank for these keywords and so it doesn’t necessarily mean that the factory that comes up first for a certain keyword is the best. It just means that they’re willing to pay the most to rank for that keyword and be on the number one spot.
And so, from a factory perspective for them to get new business, these marketplaces are one of their best options but the problem is all of the smart factories know that if they get 100 leads or so through Alibaba maybe 2% to 3% actually convert and so all of these factories had sales teams of 10, 20, 30 plus people that are trying to qualify these leads coming in. And by these leads, I literally mean you as an e-commerce entrepreneur typing a message and asking a few questions about the factory and then you’re judging the response time and really the communication ability of this sales rep that you’re talking to. And so, really the other option is trade shows. Just this week is SourceDirect at ASD Market Week in Las Vegas. I was there Sunday and Monday of this week and it’s an interesting dynamic for factories to fly over, set up a booth. And even at these tradeshows a lot of times they’re bringing products from other factories or they’re trading companies. They’re not even actual factories.
[00:15:06] Nathan: And so, I think right off the bat what I want to bring up is from a business perspective you as an e-commerce entrepreneur should understand how these factories grow. And so, those are really the two ways and so we realize and what I realize at Sourcify is that we wanted to become their best source of business. So, what we do is basically qualify all of the business that we’re bringing to our partner factories before we send out this request for quote. Just briefly the way our system works, there’s a company submits their product specs. They don’t actually search. We’re not like an open marketplace per se. They submit their product specs of what they want to manufacture. That goes out just to our partner factories in that product category and they see that, request for quote, submit back price quotes, you see the price quotes, and then it linked up to start sampling and manufacturing your products through our software. So, it kind of cuts out that China find a factory dynamic and it enables you to have a lot more visibility in your production run.
But really on Alibaba, I think at least today most people should know that there are I would say about 70% or 75% or so were trading companies or wholesalers or agents and some of them are good and some of them are bad. If you’re an e-commerce entrepreneur and you know you want to launch 100 very different SKUs, sometimes a trading company might make sense for you because if you have to work with individual factories, you should know that a factory that produces sunglasses and not going to be producing watches. Every factory their capabilities stem from the raw material and so if they’re saying that they can produce sunglasses, well they’re dealing in that product category and they might not only be able to produce plastic sunglasses. They might not have bamboo or wooden sunglasses so you really have to keep an eye out for these factories because at the end of the day they want to get as much business as they can.
[00:16:57] Nathan: And if they say, “Oh yeah, we can do sunglasses, watches, and backpacks,” well at the end of the day they could probably only do one of those product categories in their own facility and what they’re doing is shopping out those two other products to their friend’s factory and probably taking a bit of a margin. The average factory margin really fluctuates based on the volume. I would say at scale let’s say a factory is working with a big retailer like Walmart maybe they’re making about a 10% margin but for an e-commerce entrepreneur, a lot of times at a lower volume, factories are making 30s and sometimes even 40% margin. I mean it’s pretty incredible and I think really what I would like to do is dive into how you can actually try to understand how much a factory is paying or should be paying to produce your product.
[00:17:45] Scott: I think that’s a great place to go and, I mean, like you said, Alibaba makes it easy for us to go there but like you said, you’re going to have to do a lot of digging and you’re going to have to do a lot of your own research and hopefully, you can stumble on like we did in this one case, we have our own agent now that basically works for us and they get paid per piece and we’re not paying on top of that and she went directly to the source. She also speaks Mandarin. You know what I mean? So, it’s like I don’t have to worry. And a lot of the factories they won’t talk to you if you don’t speak the language so you need that middle person. So, if I’m understanding this correctly though, so what you’ve kind of done is you’ve kind of recruited the best factories in these certain categories and if I submit something and I’m going to be selling a garlic press and I want to get the best price on a garlic press, we would take that information and then it would get pushed out to or sent to the factories that you guys have already kind of vetted out and that you’ve already kind of partnered with in a sense and then from there, they’re the ones that are going to give us the quotes back.
[00:18:55] Nathan: Right. Exactly. So, that’s the biggest dynamic there for us to have roots on the ground in China and in the Philippines and India. I mean we do production runs across Asia in six countries so Thailand, Vietnam, India, China, and Bangladesh. I think another subject that we should bring up later is the – like how products are now moving outside of China and everyone’s talking about Vietnam. Everyone’s talking about India. A lot of times when you break down to actual unit costs which we’ll dive into now, you can understand why a lot these companies, especially at scale Nike and Adidas, have been producing in Pakistan for years. That’s really where they produce a lot of soccer balls and some of their apparel and very few e-commerce entrepreneurs that I know are producing in Pakistan.
[00:19:49] Scott: So, your company will connect to those other marketplaces or those other countries?
[00:19:55] Nathan: Yeah. It’s global. I mean I was in the Philippines last week. We actually might be opening up our own facility there and really the whole dynamic is like when you break down your unit costs like let’s say as an e-commerce entrepreneur you want to try to estimate how much a factory is paying for this product. You actually have to break down the specific pieces that go into producing that product. So, like let’s say you’re trying to sell watches. You’re trying to sell watches online. You’re looking for watches. There are so many little pieces that go into a watch. I’m talking the watch hands, the watch movement, the watch strap, the watch case. All of these little pieces make up that actual part and when you’re dealing with your factory, you’re actually dealing with the assembly factory and it’s the same with even apparel. When you’re communicating with a factory, you’re communicating with a cut and sew factory. You usually aren’t communicating directly with the fabric source.
And so, watches are a great example because the supply chain is usually so diverse where all these little watch pieces will come from specific factories that just focus on producing the watch hands or watch strap. I mean, all of these little pieces make up your products but so the assembly factory that you’re dealing with is going to have their own supply chain and that’s why a lot of times when a factory is quoting your production run, the lead times might be 30, 40, sometimes even 60 days because they have to really calculate and understand how long it’s going to take some of their sub-factories, sub-suppliers, to get any specific parts and they also have to understand the margin. I mean, that’s why a lot of these factories have great relationships with these smaller factories and I think really until you get to scale where you’re spending at least six figures a year on production, it’s not going to make too much sense to dive into the specific component parts but a lot of times especially as you get to scale, it makes sense to dive and actually understand the specific unit cost behind each part of your product.
[00:21:58] Nathan: But if you’re starting out or just growing, a lot of times it really just the best bet to deal directly with assembly factory. So, by understanding the unit cost and really the cost that makes up each piece to produce your product, you’re able to understand that really baseline price and until you start taking up one more capacity at a factory, it’s very rare that they’ll be transparent with you about this. But if you’re just starting and looking to go into a new product category and you aren’t really sure how much you should be paying for the product, one of the great ways to kind of set a benchmark is just type in your product to Google translate, copy and paste the Google translated version of your product into Mandarin and take that Mandarin version and put it into a Chinese marketplace called 1688.com.
It’s kind of like a Chinese sort of Amazon in some sense and basically, you can paste that product in there and then see the prices that Chinese people are paying for these products and a lot of times they’re a fifth or a tenth of what we pay here in America. So, you can really understand, okay, well these are what Chinese consumers are paying for this product. How much do I think I should be paying as an American company that’s looking to produce some sort of customized version of this product? And so, really kind of take that benchmark number and then it will enable you to have a baseline of what you should be paying for these products. And I think too a lot of times on Shopify, for example, most e-commerce entrepreneurs are going to want to shoot for like a 75% to 80% gross margin which means if you’re spending, if you’re selling your product for $100, you want to be spending $120 or $125 to produce that product.
[00:23:48] Nathan: And even at scale, a lot of these companies like MVMT in watches, one of the fastest-growing Shopify stores that’s been over $100 million in the past five years of business, their gross margin I mean we estimate that they spend about $10.70 for their baseline watches. And so, a lot of times you’re talking about almost a 90% gross margin. It’s amazing but as an e-commerce entrepreneur, your goal is to become profitable and really what that means in my mind is your gross margin minus your cost of acquisition. If your gross margin if that number is higher than your cost of acquisition then you’ll be profitable but if it cost you too much to acquire a customer whether it be through social media or SEO or whatever channel you’re utilizing then at the end of the day, you're not going to be profitable. And there are also so many operational costs that we can dive into whether it be freight forwarding or duties or all that but at the end of the day, one of the biggest costs to produce these products is actual labor costs.
And so, when you look at countries like Vietnam or the Philippines, in the Philippines as an example I was in Manila and Zamboanga last week and the labor rates there right now are at least half or even a third of what they are in some major areas of China and by major areas I mean like Guangdong, Guangzhou area that a lot of people have factories in and it’s crazy. I mean it’s the going wage in the Philippines right now for a factory worker is about $6 a day which sounds extremely low but their cost of living is also very low and so we were visiting and checking out a lot of facilities across the Philippines and labor-wise for a company or for products like all sorts of apparel items, when labor cost is basically what’s making up the main unit cost, it makes a lot of sense to transition out of China and go into some of these other countries that have lower labor rates.
[00:25:50] Nathan: And you flashback to China 10 years ago, they were competitive labor-cost-wise with the Philippines and Vietnam and India but now China has become so developed and the infrastructure there is great, it just makes them more expensive and I think from an e-commerce entrepreneur standpoint, when you look at a supply chain and when we look at a supply chain at Sourcify, we look at three things. We look at, number one, the price, the unit price to produce a product, number two, the lead time, how long does it take to produce this product and, number three, the quality. Everyone wants to produce a product toward the best price, the fastest lead time and the highest quality, and those three pillars really make up your supply chain. And so, for example, let’s say you’re producing in the Philippines or Vietnam, like in the Philippines most products are shipped FOB Manila which means that if you’re working with a factory that’s not in Manila, they then have to coordinate the freight from their city to Manila and if you’re shipping a container that can take weeks and that’s an added week to your lead time to actually get your product in your warehouse or Amazon FBA.
And so, at the end of the day, it's a balance. There's never a one-size-fits-all solution when it comes to manufacturing or sourcing but at the end of the day, if you’re able to really cut your costs by even 10% or 20%, it can drastically improve your business because I think in the e-commerce world, the company that’s able to spend the most to acquire a customer and still be profitable is the one that’s going to win.
[00:27:31] Scott: Oh, yeah. No, I agree. And, man, that’s a lot of great information that you just shared and I think for me looking at and kind of hearing what you’re saying is like, yes, if you’re just starting out, you probably can expect to pay more because you’re not going to be buying the quantities that you can but with that being said, you can probably go through a system or even a tool like yours in that process and then possibly you can even start lower than you would if you just went straight to the factory. I mean, straight to the trading company or whatever.
[00:28:11] Nathan: I mean, I’ll tell you like to be honest, here’s what I hate. I hate when those e-commerce entrepreneurs that are just starting out and they’re looking to produce products with the same factories that work with massive brands. Every day we get tons of e-commerce entrepreneurs that come to Sourcify and say, “Hey, I want to work with the factories that run production for Gymshark,” or all these major e-commerce brands and we say, “Look, this factory literally is capable of producing 300,000 to 500,000 units a month and you’re looking to produce maybe a few hundred units. You’re literally going to take up maybe 0.1% of their capacity. You’re never going to get the attention there that you should be getting.” And so, what we say is like, “Look, let’s go work with a factory that wants to grow and that’s willing to work with a company that’s just starting out and looking to scale,” because even at the end of the day, there are so many fast-growing e-commerce brands that transition factories.
MVMT, Gymshark, Original Grain, all these companies didn’t start or the factories that they started producing with aren’t the same factories that they work with today. And especially at that level, what they do is they’re never single-sourced and that’s something that e-commerce entrepreneur should really think about as they grow is let’s say something happens with the factory that you’re producing your products at, a fire or God forbid who knows what, all of a sudden you don’t have a factory that can produce your product and if it’s a very specialized product, what are you going to do? You’re going to be scrambling and it’s probably going to take you at least three months to really figure out a second source really to get the ball rolling with that product again. And so, at scale, you never want to be single-sourced and so you want to diversify your supply chain and by that, it could mean outside of China. It doesn't mean you have to stick in China. It really depends on what kind of product you're producing but at scale, you never want to be single-sourced.
[00:30:15] Scott: Yeah, I agree. I think that goes with anything. We don’t want to be relying on one channel. We don’t want to be relying on one product. We don’t want to be relying on one supplier. So, yeah, I agree with that 100%. I think we all need to be thinking about that and really kind of like covering all bases there. I mean, it’s important because the business rides on that. So, let me ask you this. Okay. Someone’s listening to this and they are like, “Well, I’ve already got my supply down and everything’s going well.” Would it still benefit them to just say, “Let me just go ahead and look into what else is out there by going down this path? And maybe I can save 10% or 20% or even 30% by doing this and the quality would be the same if not maybe even better and maybe my lead times are less,” like do you think is worth going down that road?
[00:31:09] Nathan: Yeah. I mean, 100% and especially if you have some extra time on your hands at night, most e-commerce entrepreneurs I know just because of time differences they deal with factory at night and so what I would say is, look, price doesn’t always reflect quality and so with that said, you should always be open-minded when it comes to your supply chain. I’m not saying go invest $10,000 or $30,000 into an injection mold at another facility but what I’m saying is that if it’s a relatively simple product you can go produce another sample elsewhere and even if it’s a factory that’s really looking to grow, sometimes they won’t even charge you for that sample and especially if they know you’re a big company they’ll produce samples for free. And so, really that’s the beauty of it. I think as you grow in the e-commerce world, you have more say and get more attention from these factories.
I know our supply chain team gets hit up daily by about a dozen plus different factories looking to become a part of Sourcify and we probably turn down 90% of them because most of them are trading companies and most of them just don’t fit what we do. And so, it’s this kind of dynamic that you have to understand as an e-commerce entrepreneur and everyone that’s been to any of the Canton Fairs or Magic Sourcing shows knows that once you go down and hand out a few business cards, these factories don’t stop emailing you. So, it’s just that dynamic there that every factory is looking to grow and their kind of business development process is in my mind a bit sideways right now.
[00:32:44] Scott: So, okay, so let’s kind of walk through that process then because like if I’m looking at this, two different ways, like someone is looking to source a brand-new product and then going through that process and then also or maybe saying like you said, taking an existing product and just getting another sample from another company or another factory. So, how does that work going through your service and your tool to be able to do this? Like, what’s required on my end and what kind of a process is that? Like how do I communicate? Like just kind of take me through that process.
[00:33:20] Nathan: Yeah. 100%. I mean, we try to make sourcing and manufacturing as simple as possible. Basically, someone comes with us with their tech pack, spec sheet, or CAD. They submit it on our platform. That gets sent out to our partner factories in that product category. The partner factory sees your request as a request for quote. They submit back a price quote. You see the price quotes from our partner factories then can get linked up to start producing samples and once you confirm samples, you can go through a production run. And really the beauty of it is as each step in production is complete, you see a clear timeline. You see a status update of what’s going on because I remember for me as an e-commerce entrepreneur myself too, I would email factories, “Hey, what’s going on production? Hey, when should I schedule a freight?” Even in, I mean, the sampling stage, “Hey, what’s going on with the sample?”
There’s so much back and forth that happens through a manufacturing run that it causes such a headache and really what we’ve done is basically create software for factories to better manage production which enables these e-commerce companies to have more visibility and transparency into their supply chain. And then when it comes to freight forwarding, we plug into freight forwarding partners like Flexport or Freightos or also worked with some more Chinese-oriented freight forwarders as well.
[00:34:46] Scott: Okay. So, I mean, basically so if I go to Sourcify I basically just start obviously I’d sign up for an account and then I’d have to go through that process as far as like and it’s kind of probably straightforward where I’m going to walk through. It’s going to give me the steps that I have to basically give them to take it to the next step.
[00:35:02] Nathan: Yep. Exactly. And I’ll be completely transparent with everyone that’s tuning in. Right now, we’re better suited for companies that are spending six figures or more on production a year. I mean, we work with some companies that are spending $10,000 or so on production run but very rarely just operationally speaking right now do we have the capacity to deal with companies that are just looking to produce 300 units or something.
[00:35:29] Scott: Right. Okay. That makes sense. So, yeah, if anyone wants to check that out, definitely head over to I’ll give them a short link, TheAmazingSeller.com/Sourcify and you can check that out and, yeah, I mean, I’ve kind of looked at what you were doing before I had you on. Obviously, I wanted to kind of understand that and you and I had a great conversation in Seller Labs and I know Steve Chu speaks highly of you. There’s a lot of companies out there that they’re trying to create a way to take advantage of the e-commerce sellers by offering tools or whatever. This I actually find very helpful because and obviously, it’s about people that are behind the company and I know you and I kind of know what you stand for but I like it that you’re basically, you’re a platform that vets out these manufacturers, these companies for us and then directly puts us in contact with those people.
So, it’s just a different angle. I like it because it’s kind of like a marketplace for like if you had a virtual assistant. If you have a virtual assistant like FreeeUp, they have a service that basically goes out there and they vet all the top people that are doing certain tasks. And so, it’s trusted because you’ve kind of vetted them out and that’s exactly what we’re doing here in Sourcify which I like and again, depending on where you are in your business, it may makes sense now and it might make sense to do it later but I do love this because we’re able to kind of go direct to the manufacturer and then possibly cut costs later which is cool.
[00:37:11] Nathan: And for me, I would love to help everyone really. I want to make our threshold lower and lower in terms of being able to help smaller and smaller production runs. It’s just where we’re at as a company, operationally speaking, it makes more sense to deal with larger production runs. And then at the end of the day too, a lot of these sourcing companies are going to charge buyers. They’re going to charge you whatever it may be. For us, we actually make our money from partner factories and that’s why I brought up earlier in the podcast how these factories grow. From a factory perspective, we’re their best source of business. So, instead of them having to pay for Alibaba or Global Sources or go to all these trade shows around the world, they’re paying us for the deal flow they bring them and so it’s completely free for you as an entrepreneur company that’s looking to source and manufacture products more effectively.
[00:38:01] Scott: Yeah. I mean, that makes so much sense too because also, that means you want these companies to do well because if they do well, they’re going to be around and they want or you want them to do well because then we’re going to be satisfied and we’re going to keep having you keep sourcing the product. So, it just makes sense. It’s a win-win for everyone and I don’t have to pay upfront $2,000 for you to go out there and make all this happen. It’s only based off of the product that actually gets run through that manufacturer and hopefully, I'm a long-term customer for that manufacturer. So, it just makes sense and I think it’s a great model. And so, okay, so let’s kind of wrap up with another big one that I know a lot of people are thinking here and maybe you can shed some light on it. What do we have to start thinking about any new tariffs or anything? Maybe we can dig into that one there. Because I know that’s another hour of conversation but let’s just kind of give them a summary and maybe what to be thinking about.
[00:38:55] Nathan: Yeah. You had to bring it up, huh?
[00:38:58] Scott: Well, you know.
[00:39:00] Nathan: Well, the thing with these Chinese tariffs and it’s crazy. I mean the media has hyped it up a lot. I was in the few media outlets last week in regards to these tariffs and right now the tariff codes that these tariffs, new tariffs are targeting basically aren't really around the consumer products that most e-commerce seller sell but there are new tariffs that are coming out that are supposed to hit I think early January 2019 that could have a massive effect and these tariffs are a 25% increase which basically means the PO value when you input your product, you have to pay a 25% higher duty and so really for e-commerce entrepreneurs right now I wouldn’t be too scared but keep an eye on it and there are also petitions online that enable you to try to push back on these tariffs so you can actually support lobbyists that are against these tariffs.
And really at the end of the day, I honestly am not sure why the American government is putting these tariffs in place. I mean, obviously they want to make more money but I think it’s hurting both our economy and the Chinese economy and I’ll break it down real quick because when companies here in America that are importing products from China have to pay 25% more duty tax, they basically now either have to put that 25% onto their factories or increase the cost for American consumers. And so, this is going both ways because now there’s a lot of pressure on Chinese factories to lower their costs or a lot of pressure on American consumers to pay more for these products because most of these companies they can’t just eat that 25% increase. They’ve got to be able to find a way to offset that increased cost. And so, what that means is at scale, these companies are working with their factories to try to lower cost even more and it’s a balance between increasing their sales price here in America and trying to lower their unit cost.
[00:41:05] Nathan: But really what we’ve seen at Sourcify, a lot of these companies looking to diversify their supply-chain outside of China very fast. I mean a lot of companies that who haven’t been producing in India or Vietnam or Philippines or Cambodia now are trying to transition very fast and for some products it’s easy. If it’s a cut and sew type of product it’s not too hard to train factory workers how to produce something like that but if it’s a very technical product that a lot of these tariffs are more targeted towards, it’s really hard to transition your supply-chain that fast because you have to train these factory workers actually how to produce these products and if you’re spending tens of millions on production, you’re producing at volume, it’s going to be very hard to train a 300,000 or a 500,000-person facility how to manufacture that product.
So, it’s really having a large impact on more industrial and agricultural type of products right now but I think the new tariffs have some effect on e-commerce entrepreneurs like I know shoes were one of the products that were potentially on the list and it’s crazy like 70% of the world shoes are produced in China so all of these products might see an increased cost or will have to transition outside of China very fast. I mean, it’s something to keep an eye on for sure.
[00:42:22] Scott: Yeah. So, what I’m hearing though is like a lot of companies are probably that are worried about this that are primarily in China are going to start looking for other sourcing and that’s going to be outside of China.
[00:42:34] Nathan: Yeah. They already have. I mean, usually, I just stick to China in my trips. I mean, that’s why this year I’ve been to Thailand, Vietnam, the Philippines already and I’ll be back there again.
[00:42:45] Scott: Okay. Yeah. All right. Yeah. I mean, again it’s what could be coming and again as that backup plan, we probably should be doing that anyway so why not start looking outside? Of course, if your product can be duplicated in another factory, in another country, that’s the other question like you said without a ton of training or any events.
[00:43:11] Nathan: Yeah. Another thing I want to bring up real quick just briefly is that a lot of the raw material is actually is still coming from China when you’re producing in these other countries. So, like a lot of factories in Vietnam, for example, they actually get let’s say producing shirts or hats or whatever may be, they actually get that raw material from China so it’s something you got to keep in mind even as an e-commerce entrepreneur that’s growing is, “Okay. Well, now I may need to get my factory a bit more lead time to actually import the raw material from China or wherever they’re getting that raw material from.” So, it’s really increasing the lead time in some sense with a lot of these companies
[00:43:47] Scott: Cool. All right. Yeah. No, this was great. Very, very educational and definitely gave me some things to think about and I think everyone listening has gotten a lot especially that there’s probably room to improve your margins probably more than you think. And I think in the beginning and I think that’s one big mistake a lot of new entrepreneurs make especially in the e-commerce is they don’t realize that the cost upfront might be a little bit higher. Your margins might be less but you're able to get to market, you're able to test and validate that market or that product or those products in your brand but eventually, we could go outside of that which we should and start bringing that cost down without compromising quality. I think this is a great solution right here and then really retargeting to get that margin better and that profit margin better. So, yeah man, I appreciate it. This has been awesome to really just have you on, hear your story. I’m sure I’m going to have to have you back on and get some updates and probably just give us some more stuff that we can implement to really diversify our supply chain and not just rely on that one. So, anything else you want to wrap up with, Nathan, before we finally wrap up here?
[00:45:01] Nathan: Yeah. I mean, happy to help anyone. If anyone wants to reach out, feel free. My LinkedIn is just Nathan Resnick is probably the best way to get in touch or just go to TrySourcify.com and, Scott, I really appreciate you having me on.
[00:45:13] Scott: Yeah. No, that’s awesome. I really do appreciate it and I will link everything up in the show notes and I’m sure I’ll be in touch and I’m sure that a lot of people listening will be in touch as well. Very interesting and just a great story too, Nathan. I mean, man, living in China and seeing some fish flopping around in the sink. That’s got to be some eye-opening stuff right there. All right, man. Hey, I appreciate it. I won’t take up any more of your time. I appreciate it. I know the TAS audience appreciates it. I’ll be in touch.
[00:45:41] Scott: All right. So, there you have it. I wasn’t kidding, right? A lot of great information, eye-opening stuff and, yeah, I mean I'm definitely going to be looking into this myself again talking about like diversifying your channels but diversifying your suppliers is another thing that we should be thinking about. So, definitely, some things to think about. I would definitely reach out to Nathan if you're interested at all even just picking his brain I mean he’s just a great guy. He’ll help you in any way that he can but if you just want to reach out to him or even try their service definitely, definitely check them out and I will link everything up in the show notes. Again, TheAmazingSeller.com/Sourcify and again I’ll link that up in the show notes so you can go to TheAmazingSeller.com/558 for all of the show notes and all the links and everything we discussed will be there as well.
All right, guys. So, that is going to wrap up this episode. I have to remind you once again, remember, I am here for you, I believe in you, and I am rooting for you, but you have to, you have to, come on, say it with me, say it loud, say it proud, take action! Have an awesome amazing day! And I’ll see you right back here on the next episode.
LINKS MENTIONED IN THIS EPISODE
- Steve Chou
- Seller’s Summit
- Google Translate
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